Derivative financial instruments

6 Months Ended

Jun. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative financial instruments

Derivative financial instruments

Interest rate swaps

We have entered into interest rate swaps to mitigate the interest rate risk inherent to our floating rate debt. Our interest rate swaps outstanding during the three and six months ended June 30, 2024 and 2023 are as follows:

Notional Amount	Interest Rate Received	Fixed Rate Paid	Effective Date	Maturity Date
Designated as Cash Flow Hedges
$275 million	One-month SOFR	4.05%	April 15, 2023	April 15, 2025
$275 million	One-month SOFR	3.71%	April 15, 2023	April 15, 2026
Not Designated as Hedging Instrument (1)
$800 million	One-month LIBOR	2.85%	March 29, 2018	March 31, 2023

________

(1) Our LIBOR-based interest rate swaps were designated as cash flow hedges in March 2019, but were deemed ineffective in February 2020 due to the decrease in interest rates.

Foreign currency forward contracts

We have entered into foreign currency forward contracts to mitigate the risk of foreign exchange fluctuations on certain direct expenses, such as salaries and wages and food and beverage costs, which are denominated in Mexican Pesos. As of June 30, 2024, the total outstanding notional amount of the forward contracts was $52.0 million, or $922.3 million Mexican Pesos, which will be settled monthly with maturity dates between July 2024 and December 2024.

Quantitative disclosures about derivative financial instruments

The following tables present the effect of our derivative financial instruments, net of tax, in the Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 ($ in thousands):

	Three Months Ended June 30,
	2024				2023
	Interest rate swaps(1)		Foreign currency forwards(2)		Interest rate swaps
Change in fair value	$	(1,774)	$	4,745	$	(9,874)
Reclassification from AOCI to the income statement	$	2,010	$	647	$	1,316

	Six Months Ended June 30,
	2024				2023
	Interest rate swaps(1)		Foreign currency forwards(2)		Interest rate swaps
Change in fair value	$	(7,626)	$	1,877	$	(9,874)
Reclassification from AOCI to the income statement	$	4,034	$	593	$	(1,579)

________

(1) Amounts are reclassified from AOCI to interest expense. As of June 30, 2024, the total amount of net gains expected to be reclassified during the next twelve months is $5.4 million.

(2) Amounts are reclassified from AOCI to direct expenses. As of June 30, 2024, the total amount of net losses expected to be reclassified during the next twelve months is $2.5 million.

Derivative Financial Instruments	Financial Statement Classification	Three Months Ended June 30,				Six Months Ended June 30,
		2024		2023		2024		2023
Designated as Cash Flow Hedges
Interest rate swaps	Interest expense	$	(2,010)	$	(1,316)	$	(4,034)	$	(1,316)
Foreign currency forwards	Direct expenses	$	107	$	—	$	(73)	$	—
Not Designated as Hedging Instruments
Interest rate swaps(1)	Interest expense	$	—	$	—	$	—	$	3,013

________

(1) Includes the loss from the change in fair value of our interest rate swaps and the cash interest paid or received for the monthly settlements of the derivative.

The following table presents the effect of our derivative financial instruments in the Condensed Consolidated Balance Sheet as of June 30, 2024 and December 31, 2023 ($ in thousands):

Derivative Financial Instruments	Financial Statement Classification	As of June 30,		As of December 31,
		2024		2023
Designated as Cash Flow Hedges
Interest rate swaps	Derivative financial assets	$	6,483	$	2,966
Foreign currency forwards	Derivative financial liabilities	$	2,470	$	—

Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of each instrument. We incorporate these counterparty credit risks in our fair value measurements (see Note 13) and believe we minimize this credit risk by transacting with major creditworthy financial institutions.